Case studies from the Short-term Ombud

The October edition of the OSTI Briefcase contains some interesting insights on two complaints, in particular.

Promissary warranty

The issue for determination in this matter was whether the insurer was entitled to reject a claim for the loss of a tennis bracelet, worth nearly R120 000, on any one of the following four grounds set out in the insurer’s letter of rejection:

late notification of the claim;

the failure to take reasonable precautions and care to prevent or minimise the loss;

the item not being in a safe; or

the failure to have the condition of the jewellery checked and a valuation certificate obtained within 24 months.

The insurer argued that the endorsement on the schedule requiring jewellery to be secured in a safe when not being worn was a promissory warranty and absolute in nature. The insurer asserted that, as there was a breach of the warranty, there was no obligation on the insurer to accept liability for the loss.

The reasoning by the Ombud in arriving at her decision is very clearly set out in the relevant article, and we suggest readers take time to read it. A link is provided below to also allow you to share it with clients.

Driving on a non-public road

Ms. Z submitted a claim to her insurer following a motor vehicle accident. The accident occurred whilst Ms. Z was driving in her residential complex. Ms. Z claim was rejected on the basis that she was driving on a non-public road and therefore did not enjoy cover under the policy for the loss. In support of its rejection, the insurer relied on two provisions of the policy, including one that reads:

“The maximum repair contribution available at the time of a claim will be reduced by 50% where the motor vehicle accident or loss takes place on a road that is not cemented or tarred. No benefits shall apply whilst the vehicle is being driven where there is no formally registered road.”

The Ombud held that it would still not be in a position to justify a finding in favour of the insurer based on the Insurer’s failure to draw Ms. Z’s attention at sales stage to the specific exclusion on which it sought to rely. This is an unusual term in an insurance policy and as such, more should have been done to bring it to the insured’s attention.

It is not sufficient to merely to refer to the terms and conditions contained in the policy documents sent to the insured after the contract has been concluded. There must be full and proper compliance with the Policyholder Protection Rules prior to the contract being concluded and which will then enable the insured to exercise an informed choice as to whether or not she/he wishes to agree to the terms offered by the Insurer.

About Paul Kruger

He is both editor and writer-in-chief of the Moonstone Monitor, the Moonstone Investment Indicators and the Moonstone Online website. After 35 years in financial services, he is as passionate about the industry as he is about sport, wine and music.